Everything You Need To Know About the Solana Blockchain
When it comes to cryptocurrency, NFTs and blockchains, Solana stands apart from other technology like ethereum or bitcoin. But what makes the Solana blockchain so different? What is it, exactly? And is Solana the future of blockchain?
Read: 5 Things You Must Do When Your Savings Reach $50,000
What Blockchain Is Solana?
Solana is one of the few blockchains based on proof-of-history, rather than proof-of-work, like Bitcoin, or proof-of-stake, like Ethereum now, after the merge. Solana uses proof-of-stake in conjunction with PoH, and did so even before Ethereum did.
It is a public, open-source blockchain founded by Anatoly Yakovenko in 2017. Compared to ethereum, which was founded in 2013, and bitcoin, launched in 2009, it is fairly new technology.
Like many blockchains and cryptocurrencies, Solana started with a whitepaper. Unlike the famous Bitcoin whitepaper of just nine pages, the Solana whitepaper spanned 32 pages, with seven sections. The Solana whitepaper described Proof of History, a consensus mechanism that uses a reliable clock for network synchronization, which keeps track of time between computers that do not trust one another.
Yakovenko said that a PoH system would be at least 10,000 times faster than the current ethereum and bitcoin blockchains, which meant the blockchain could eventually become a global, decentralized payment platform. He first implemented a private code base in the C programming language. Another programmer, Greg Fitzgerald, suggested he re-code the project using Rust, a programming language that Fitzgerald believed would offer increased productivity. The two programmers named the project Loom, and Fitzgerald began creating an open-source prototype blockchain based on Yakovenko’s white paper.
However, Ethereum started a “Loom Network” of its own at the same time, according to Solana Documentation. Yakovenko, Fitzgerald, and a third partner, Stephen Akridge, rebranded their PoH blockchain as Solana, named after Solana Beach outside of San Diego, where the three lived and surfed together when they worked at semiconductor manufacturer Qualcomm.
Knowing the blockchain’s beginnings, launched by three friends and beach buddies, it’s appropriate that the cryptocurrency bought and sold on the blockchain is SOL, which is Latin for sun.
How Is Solana Faster?
Ultimately, the combination of PoH and PoS consensus mechanisms make transactions on the Solana blockchain faster, more sustainable and scalable. Experts say that Solana could compete with Visa as a payment processing platform someday due to its speed, low congestion and low fees. It is one of the first steps toward worldwide decentralized finance.
Is Solana a Coin or Blockchain?
Solana is both a blockchain, which also houses NFTs and manages smart contracts, and a coin or cryptocurrency. Often, the coin goes by the name SOL and is traded by the designation SOL on crypto exchanges.
Is Solana a Private Blockchain?
Solana is not a private blockchain and was never designed to be private. It is a public blockchain network, which means that other users can access the blockchain to perform transactions.
Further, because the Solana blockchain is open source, which means developers can use it in multiple ways. Solana can be used to create, sell or buy non-fungible tokens, to create and operate decentralized finance applications, to create and manage smart contracts, and to create blockchain games as part of Web3 or the metaverse.
Because of its open-source nature, it has become a prominent platform for minting, buying, selling and trading NFTs.
What Makes Solana Different from Other Blockchains
Solana uses a consensus mechanism called Proof-of-History or PoF, along with the PoS consensus mechanism recently adopted by ethereum during the Ethereum Merge. Yakovenko’s whitepaper, “Solana: A new architecture for a high performance blockchain” first addressed the issues of blockchains of that time.
“Current publicly available blockchains do not rely on time, or make a weak assumption about the participant’s ability to keep time. Each node in the network usually relies on their own local clock without knowledge of any other participant’s clocks in the network.”
The lack of a trusted time source, Yakovenko pointed out, means that when a message timestamp is used to accept the validity of a node, there’s no way to verify it. When PoH is combined with PoS, PoH can reduce messaging, resulting in faster transactions. In 2017, Yakovenko predicted that up to 710k transactions per second could be possible. Solana hasn’t quite reached those processing speeds today, but it can currently process up to 65,000 transactions per second, theoretically. It also has lower fees and a smaller carbon footprint than other blockchains.
What Is Proof of Stake?
It’s important to understand the Proof-of-Stake, or PoS, mechanism that underlies the Solana blockchain. Known to be more eco-friendly and faster than Proof-of-Work consensus, PoS allows stakers — similar to miners in a PoW blockchain — to stake their crypto to a validator. When a validator is selected, that person earns SOL coins as a new block in the chain is created.
However, without PoH consensus in place, there is no good way to determine which validator came first in the chain and it takes more time to do so. Ethereum, for instance, takes roughly 12 seconds to create a new block, while Solana takes just 400 milliseconds.
What Is Proof of History?
The PoH mechanism verifies the passage of time between two events — specifically, the time between the creation of two blocks in a chain. When a block is created, a validator is selected to create the next block, using the PoS mechanism. The validator spends five seconds working to get a slot and produce a block. Then, the PoS mechanism chooses the next validator, and the chain continues.
What Is SOL and Is It a Good Investment?
One of the primary functions of the Solana blockchain, is the creation, distribution and trading of its cryptocurrency, SOL.
You can buy SOL on most of the best crypto exchanges, including Gemini and Coinbase. If you own other cryptos, you can also trade for SOL on a decentralized exchange, or DEX. But most beginning investors will want to start on a reputable crypto exchange, which provides an online wallet for you. As your investments grow, you’ll want to look at a cold storage wallet to protect your crypto by storing it offline when you aren’t trading.
Should You Invest in SOL?
SOL is currently the ninth largest cryptocurrency by market cap, with a value of $10,785,556,955, according to CoinMarketCap.com. SOL coins currently have a value of just over $30, which makes SOL more than just a penny crypto. It’s in the top 20 of all cryptos for price in October 2022. The coin debuted three years after the blockchain, launching in April 2020 at a price of $0.79 per coin. It has lost and gained value since then, reaching a high of $260 in November 2021 and then declining steadily during the current crypto winter.
Due to the blockchain’s efficiency, stability and overall potential, however, experts are making SOL price predictions of as high as $954 within the next few years. But even if SOL does not achieve that value, there are still many other advantages to using the blockchain for decentralized transactions, smart contracts, and NFT minting and investing.
Buying and Selling NFTs on the Solana Blockchain
NFTs, or non-fungible tokens, are created and traded on blockchains, just like crypto. However, unlike coins, NFTs are unique investments, much like art. Many are digital representations of artwork, songs, videos, poems or avatars. Some NFTs give the holders access to special events.
Because Solana fees are low but developers need some specialized coding knowledge, the blockchain has become a stomping ground for innovative ideas and projects, like DeGods NFTs, which allow users to stake their NFTs to earn DUST utility tokens, which can be traded for cash. DeGods is also one of the NFTs that moved to a 0% royalty structure for artists and creators.
If you’re interested in trading DeGods or other NFTs on the Solana blockchain, you can do so on popular NFT marketplaces like OpenSea, Magic Eden, Solenart and Solsea. Magic Eden, which claims to be the leading NFT marketplace on Solana, has no listing fee but takes 2% on each transaction.
In addition to DeGods, some of the top NFT collections to consider if you’re interested in investing on the Solana blockchain include:
Cets on Creek
Degenerate Ape Academy
Solana Monkey Business
Fearless Bulls.
What Is Solana Pay? Fast, Cheap Payment Processing
In March 2022, AnalyticsInsight.net speculated as to whether or not Solana Pay, the blockchain’s payment platform, would overtake Paypal.
The protocol represents decentralized finance, allowing consumers to send digital currency from their wallet to a friend or merchant account. Merchants could embed loyalty rewards, discounts and offers directly in the transactions, as well.
Like the blockchain itself, Solana Pay is built on an open protocol platform, enabling developers to build and customize capabilities to their own criteria.
Solana Pay has applications in Web3, or the metaverse. People can use Solana Pay for transactions online and at brick-and-mortar retailers, the same way we use Paypal or Apple Pay today. In some cases, consumers could walk out with a physical product as well as an NFT representing the purchase or even additional perks or rewards, in their Solana wallet.
Where Can You Use Solana Pay?
You can currently use Solana Pay with three digital wallets: Phantom, Crypto Please and FTX. Phantom and Crypto Please are Solana-only wallets used to buy, sell, trade or hold Solana NFTs and SOL coins. FTX supports all cryptocurrencies, including SOL and NFTs on the Solana blockchain.
One benefit to Solana Pay is that you can use it to pay with SOL tokens and other cryptos, including the USDC stablecoin, which has a value pegged to the U.S. dollar. This makes Solana Pay viable in brick-and-mortar stores and online retailers that don’t choose to accept cryptocurrency directly as a form of payment. The Solana blockchain currently holds $4 billion in USDC, so it’s clear there’s interest in the coin.
With the rising costs of credit card processing, increasing numbers of merchants may also be open to Solana Pay to save money. Additionally, since blockchain transactions are irreversible, there is no danger of chargebacks, which cost money and hurt a merchant’s reputation.
Is Solana the Future of Blockchain?
When you consider all the possibilities for the Solana blockchain, it’s possible that SOL could ultimately rise up and surpass ethereum and bitcoin as a leading cryptocurrency. It’s more likely, however, that Soldana’s PoH consensus mechanism will be adopted in future blockchains and perhaps even improved as technology advances.
After all, the technology still hasn’t achieved the founder’s predicted speed of 710,000 transactions per second, so there’s plenty of room to grow.
Experts see Solana’s low fees as one of the key selling points for future adoption.
“SOL is one of the leading contenders in the smart contract blockchain space. They are likely to be one of the chief beneficiaries if the Ethereum upgrades fail to deliver lower transaction fees,” Panxora Hedge Fund’s general partner Gavin Smith told CryptoNews.com.
Following a few outages over the summer, some questions Solana’s long-term stability. But protocol updates have reduced outages and improved optimism surrounding the network, experts say.
Final Take
As an investment, SOL is worth watching. It has a growing presence in the NFT market and could, someday, represent the payment of choice in Web3. There are still challenges to overcome, not the least of which is the lingering crypto winter. But if any blockchain or crypto has the sustainability, speed, and low fees to stay the course, it might be Solana.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
This article originally appeared on GOBankingRates.com: Everything You Need To Know About the Solana Blockchain
